ASSIGNMENT

ON
FUNDAMENTAL ANLAYSIS OF BHARTI
AIRTEL

SUBJECT:- SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT

SUBMITTED TO SUBMITTED BY
MS. MANISHA GUPTA KULBEER KAUR
ROLL NO:- 80804317030
SHAVIKA GAGNEJA
ROLL NO:- 80804317065
MBA 3rd

PUNJAB INSTITUTE OF MANAGEMENT AND TECHNOLOGY

(MANDI GOBINDGARH)
 Fundamental analysis is the examination of the underlying forces that affect the
well being of the company, industry groups and companies. As with most analysis the
goal is to develop a forecast of future price movement and profit from it. At the company
level, fundamental analysis may involve examination of financial data, management ,
business concept and competition. At the industry level their might be an examination of
supply and demand forces of the products. For the national economy fundamental
analysis might focus on economic data to asses the present and future growth of the
economy.
Fundamental analysis is a method of evaluating a security by attempting to
measure its intrinsic value by examining related economy, financial and other qualitative
and quantitative factors. Fundamental analysis attempt to study every thing that can effect
the securities value including macro economic factors and individual specific factors.
Three phase of the fundamental analysis
A. Understanding of the Macro Economic environment and developments
(Economy analysis)
B. Analyzing the prospectus of the industry to which the firm belongs(Industry
analysis)
C. Assessing the projected performance of the company( Company analysis)
 The purpose of analyze economic condition of the country in fundamental
analysis to asses the general economic situation both within the country and inter
nationally.

The economy is like the tide and the various industry groups and individual
companies are like boats. When economy expands most industry groups and companies
benefits and grows. When the economy decline, most sectors and companies usually
suffer. The stock market does not operate in a vacuum it is an integral part of the whole
economy of a country, more so in a free economy that of United States and to some
extent in mixed economy like ours.

To gain an insight into the complexities of stock market. One needs to develop a
sound economic understanding and be able to interpret the impact of important economic
indicators on stock markets.

The following are some important factors which should be taken into account while
doing fundamental analysis:
• Economic Growth
• Per capita income
• Industrial Production
• Inflation
• Interest Rates
• Foreign Exchange Reserves
• Budgetary Deficit
 • Domestic Savings and Investment
• Tax Rates
• Infrastructure
• Political Situation

INDIAN ECONOMY ANALYSIS

INDIA GDP GROWTH RATE
• India Gross Domestic Product (GDP) expanded 6.10% over the last 4 quarters.
• The India Gross Domestic Product is worth 1217 billion dollars or 1.96% of the
world economy, according to the World Bank.
• India's diverse economy encompasses traditional village farming, modern
agriculture, handicrafts, a wide range of modern industries, and a multitude of
services. Services are the major source of economic growth, accounting for more
than half of India's output with less than one third of its labor force.

India GDP Growth Rate chart

Year Mar Jun Sep Dec Average

2009 5.80 6.10 5.95
2008 8.60 7.80 7.70 5.80 7.48
2007 9.70 9.20 9.00 9.30 9.30
2006 10.40 9.80 10.60 9.30 10.03

12
10
8
6 GDP
4
2
0
2006 2007 2008 2009

INTERPETATION:-
AS WE SAW THAT GDP GROWTH RATE OF INDIA’S SHOWS DECLINING TREND. MAIN REASON BEHIND THIS
IS LESS RAIN AND GLOBAL ECONOMY MELTDOWN. BUT AS WE SEE IN JUNE 2009 GDP RATE INCREASES TO
6.10 AS COMPARE TO MARCH 2009’S 5.8. IT SHOWS THAT INDIA’S GDP RATE IS INCREASING. IT SHOWS
GOOD PROSPECTUS FOR INVESTORS IN FUTURE. AND INVESTOR CAN GET BENEFIT BY INVESTING IN INDIAN
COMPANY

INDIA’S INFLATION RATE

Inflation rate refers to a general rise in prices measured against a standard level of
purchasing power. The most well known measures of Inflation are the CPI which
measures consumer prices index, and the GDP deflator, which measures inflation in the
whole of the domestic economy. India's diverse economy encompasses traditional village
farming, modern agriculture, handicrafts, a wide range of modern industries, and a
multitude of services. Services are the major source of economic growth, accounting for
more than half of India's output with less than one third of its labor force. The economy
has posted an average growth rate of more than 7% in the decade since 1997, reducing
poverty by about 10 percentage points.

India Inflation Rate chart

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2009 10.45 9.63 8.03 8.70 8.63 9.29 11.89 11.72

2008 5.51 5.47 7.87 7.81 7.75 7.69 8.33 9.02 9.77 10.45 10.45 9.70

2007 6.72 7.56 6.72 6.67 6.61 5.69 6.45 7.26 6.40 5.51 5.51 5.51

2006 4.39 5.31 5.31 5.26 6.14 7.89 6.90 5.98 6.84 7.63 6.72 6.72
Interpretation:- As graph shows that inflation rate is rising year by year. Inflation in
economy is not good from investor’s point of view. When inflation rate rises it become
the reason of extra costs to business, thereby squeezing their profit margin and leading to
real decline in profitability and there by reducing the dividends on variable income
securities.
 INDIA INTEREST RATE

India benchmark interest rate stands at 3.25 percent. In India, interest rate decisions are
taken by the Reserve Bank of India's Central Board of Directors. The official interest rate
is the benchmark repurchase rate.

India Interest Rate chart,

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2009 4.00 4.00 3.50 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25
2008 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 5.00
2007 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00
2006 5.25 5.50 5.50 5.50 5.50 5.50 5.75 6.00 6.00 6.00 6.00 6.00

Interpretation :- Data in graph shows that in 2009 interest rate are less than
previous year. Means government is helping the businessmen so that the can
continue their business without any difficulty in economic crisis type of condition by
reducing the interest rate. Low interest rate is good from investor’s point of view.
 INDIA CURRENT ACCOUNT

Current Account is the sum of the balance of trade (exports minus imports of goods and
services), net factor income (such as interest and dividends) and net transfer payments
(such as foreign aid). The balance of trade is typically the most important part of the
current account. This means that changes in the patterns of trade are key drivers in the
current accounts of most of the world's economies. However, for the few countries with
substantial overseas assets or liabilities, net factor payments may be significant. Positive
net sales to abroad generally contributes to a current account surplus; negative net
sales to abroad generally contributes to a current account deficit. Because exports
generate positive net sales, and because the trade balance is typically the largest
component of the current account, a current account surplus is usually associated with
positive net exports. The net factor income or income account, a sub-account of the
current account, is usually presented under the headings income payments as outflows,
and income receipts as inflows. Income refers not only to the money received from
investments made abroad (note: investments are recorded in the capital account but
income from investments is recorded in the current account) but also to the money sent
by individuals working abroad, known as remittances, to their families back home. If the
income account is negative, the country is paying more than it is taking in interest,
dividends, etc. For example, the United States' net income has been declining
exponentially since it has allowed the dollar's price relative to other currencies to be
determined by the market to a point where income payments and receipts are roughly
equal of trade forms part of the current account, which also includes other transactions
such as income from the international investment position as well as international aid. If
the current account is in surplus, the country's net international asset position increases
correspondingly. Equally, a deficit decreases the net international asset position.

India Current Account chart, historical data, forecast and news. India is leading exporter
of gems and jewelry, textiles, engineering goods, chemicals, leather manufactures and
services. India is poor in oil resources and is currently heavily dependent on coal and
foreign oil imports for its energy needs. Other imported products are: machinery, gems,
fertilizers and chemicals. Main trading partners are European Union, United States, China
and UAE .

Year Mar Jun Sep Dec Total

2009 4.7 -5.8 -1.1
2008 -1.5 -9.0 -12.5 -13.0 -36.1
2007 4.3 -6.7 -4.3 -4.5 -11.3
2006 4.5 -4.1 -6.3 -3.7 -9.5
Interpretation: - India’s current account shows negative current account. Means import
is greater than export. Investor doesn’t take it positively. As compare to previous year
negative balance payment has increased.
 IMPACT OF BUDGET ON TELECOME INDUSTRY

• The Finance Minister has announced the allocation of Rs 2,400 crore from the
Universal Service Obligation Fund (USOF) to subsidize mobile, Internet and
landline operations in rural India.
• With the government planning to subsidize construction of 11,000 telecom
towers across 2.4 lakh villages, the road ahead for the rural sector seems smooth.
• These steps definitely promise greater spending on telecom infrastructure in
around 3 lakh villages which are yet to see the telecom revolution.
• According to budget estimates, for 2009-10, the government expects to collect Rs
48,335.33 crore from the telecom sector, with 3G spectrum sales contributing
75% to the total. In FY 2008-09, the government's receipts from the sector stood
at Rs 13,174.29 crore.
• The industry is also elated about the CVD exemption on the manufacture of
cellphones and accessories.
• The industry's happiness did not last long with Pranab Mukherjee announcing the
increase in Minimum Alternate Tax (MAT) from 10% to 15%, which came as a
huge blow to the sector.
• The broadcasting segment can cheer. There is a small decrease in duty for LCD
panels from 10% to 5%, which will bring down prices by a maximum of Rs 3,000
per LCD TV set. LCD TV shipments that stood at around 1.3 mn units in 2008 are
expected to grow in excess of 50% year-on-year as the preference for flat panel
televisions continues to soar amongst Indian viewers.
• However, the industry in general seems happy on the increased spends on robust
infrastructure upgrades and on rural areas, which will possibly add another
chapter to the telecom story in India.
The purpose of industry analysis is to review prevailing conditions within specific
industry and its segments. The company's industry obviously influences the outlook for
the company. Even the best stocks can post mediocre returns if they are in an industry
that is struggling.
“It is often said that a weak stock in a strong industry is preferable to a strong stock in a
weak industry.”
To assess the industry group potential, an investor would want to consider the overall
growth rate, market size, and its importance to economy. While the individual company
is still important, its industry group is likely to exert as much as, or more, influence on
the stock price. When stock move the usually move as groups; there are very few lone
guns out there. An understanding of the industry sector involved, including the maturity
of the sector and any cyclical effects that the overall economies have on it, is also
necessary.
The followings are some important factors which should be considered in
Fundamental Analysis
• Growth: A growing industry gives room for profitability.
• Profitability: Average profitability of the industry should be attractive.
• Demand-Supply: the wider demand supply gap, the better is the industry’s
fortune in the future
• Entry barrier
• Competition and Market share:
• Technology trends
• Government Policy
• Capacity Utilization
• Bargaining power of buyers
 Indian Telecommunication industry

Indian Telecommunication industry, with about 464.82 million mobile phone

connections (June 2009) , is the third largest telecommunication network in the world
and the second largest in terms of number of wireless connections. For the past decade or
so, telecommunication activities have gained momentum in India. Efforts have been
made from both governmental and non-governmental platforms to enhance the
infrastructure. The idea is to help modern telecommunication technologies to serve all
segments of India’s culturally diverse society, and to transform it into a country of
technologically aware people.

' Telecom Industry in India ' is regulated by 'Telecom Regulatory Authority of India'
(TRAI). It has earned good reputation for transparency and competence.

Two types of players exists in ' Telecom Industry India ' community –

• State owned companies like - BSNL and MTNL.

• Private companies like - Reliance Infocomm and Tata Teleservices,
Hutchison-Essar, Bharti Tele-Ventures, Escotel, Idea Cellular, BPL
Mobile, Spice Communications etc.

Telecom industry in India has a big market potentiality and is a fast growing sector.
Government of India is eager to reconstitute this telecom industry by enacting effective
policies for more investments from foreign companies, which results in a very
competitive and deregulated market in the world.

Policies of telecom industry in India

Government of India implemented the unified access licensing regime, which enables
basic and cellular mobile service to use any modern technology. In 1997,
Telecom Regulatory Authority of India (TRAI) was formed to facilitate the
growth of the telecom sector in India.

Major services and market potentiality of Telecom industry in India

Telecommunication sector in India is primarily subdivided into two segments, which are
• Fixed Service Provider (FSPs) and
• Cellular Services.
Telecom industry in India constitutes some essential telecom services like
• telephone,
• radio, television
• and Internet.
Telecom industry in India is specifically emphasizing on latest technologies like
• GSM( Global System for Mobile Communications),
• CDMA(Code Division Multiple Access),
 • PMRTS(Public Mobile Radio Trunking Services),
• Fixed Line and WLL(Wireless Local Loop ).
Growth of telecom industry in India

• Indian telecom industry continued to register significant growth in 2008-09.

• Indian telecom network, with about 414 million connections in February 2009, is
the third largest in the world, while it is credited with the second largest wireless
network in the world.
At the current pace, the target of 500 million connections by 2010 is well within reach
.The Government of India has reiterated its commitment to reach out to the remote and
uncovered areas and to augment the broadband facilities in rural areas.

Economic Survey 2008-09

Growth
Growth of telephones over the years
(in million)
March March March Feb.
06 07 08 09

Fixed lines 40.23 40.77 39.41 37.73

CDMA 32.67 44.62 68.38 92.14

GSM 69.19 120.47 192.70 283.98

Wireless
(CDMA & GSM) 101.86 165.09 261.08 376.12

Gross Total 142.09 205.86 300.49 413.85

Source : Department of Telecommunications

point to point
 450
Fixed line
400
350
CDMA
300
250
GSM
200
150
Wireless(CDMA
100 &GSMA
50
Gross Total
0
Mar-06 M ar-09 Mar-08 Feb-09

Interpretation :- Graph shows that India telecom industry is growing in CDMA,

GSMA and wireless (CDMA & GSMA) sectors . It shows overall upward trend of
growth rate in these sectors. It will beneficial for investors to invest in telecom
industry. Because it is growing industry.
Future prospects are good in this industry.
 The purpose of company analysis to analyze the financial and non-financial
aspects of a company to determine whether to buy, sells, or holds onto the shares of a
particular company

After determining the economic and industry conditions, the company itself is
analyzed to determine its financial health. This is usually done by studying the company's
financial statements. From these statements a number of useful ratios can be calculated.
The ratios fall under five main categories: profitability, price, liquidity, leverage, and
efficiency. When performing ratio analysis on a company, the ratios should be compared
to other companies within the same or similar industry to get a feel for what is considered
"normal." These are quantitative factors of company analysis; there are also some
qualitative factors which should be considered also.

• Find out as much as possible about the company and their products.

• Do they have any “core competency” or “fundamental strength” that puts them
ahead of all the other competing firms?

• What advantage do they have over their competing firms?

 • Do they have a strong market presence and market share? Or do they constantly
have to employ a large part of their profits and resources in marketing and finding
new customers and fighting for market share?

Following are some more important aspects about company

• Shareholding pattern
• Growth
• Technology
• Expansion Plan
• Profitability
• Capital History
• Marketing Capabilities
• Most important its financial statement

After you understand the company & what they do, how they relate to the
market and their customers, you will be in a much better position to decide whether
the price of the companies stock is going to go up or down.

So fundamental analysts use different tools and ratios to compare all sorts
of companies no matter what business they are in or what they do!

Financial ratios
A financial ratio is an expression of the relationship between two selected items from the
income statement or the balance sheet. Ratio analysis helps you to evaluate the weak and
strong points in your financial and managerial performance. Financial ratio analysis is
calculation and comparison of ratio which are derived from the information in a
company’s financial statements. The level and historical trends of these ratios can be
used to make inferences about a company’s financial condition its operations and
attractiveness as an investment.
1. Balance sheet ratio analysis
Current ratio
Quick ratio
2. Income statement ratio anlysis
Gross margin ratio
Net profit margin ratio
3. Management/efficiency ratios
Inventory turnover ratios
 Account receivable ratio
4. Overall profitability analysis
Return on assets ratio
Return on investment ratio
5. Market test or valuation ratios
Earning per share

COMPANY ANALYSIS OF BHARTI AIRTEL

Bharti Airtel
• Bharti Airtel (BSE: 532454), formerly known as Bharti Tele-Ventures LTD
(BTVL) is India's largest cellular service provider with more than 110 million
subscribers as of Sep 2009.
• With this, Bharti is now the world's third-largest, single-country mobile operator
and sixth-largest integrated telecom operator.
• It also offers fixed line services and broadband services.
• It offers its TELECOM services under the Airtel brand and is headed by Sunil
Bharti Mittal.
• The company also provides telephone services and Internet access over DSL in 14
circles.
• It also acts as a carrier for national and international long distance communication
services.
• The company has a submarine cable landing station at Chennai, which connects
the submarine cable connecting Chennai and Singapore.
• The businesses at Bharti Airtel have always been structured into three individual
strategic business units (SBU's)
- Mobile Services,
- Airtel Telemedia Services
- & Enterprise Services.
• The mobile business provides mobile & fixed wireless services using GSM
technology across 23 telecom circles while
• The Airtel Telemedia Services business offers broadband & telephone services
in 95 cities and has recently launched a Direct-to-Home (DTH) service, Airtel
digital TV. The company provides end-to-end data and
 • Enterprise services to the corporate customers through its nationwide fiber optic
backbone, last mile connectivity in fixed-line and mobile circles, VSATs, ISP and
international bandwidth access through the gateways and landing station.[2]

Globally, Bharti Airtel is the 3rd largest in-country mobile operator by subscriber base,
behind China Mobile and China Unicom.

MARKET SHARE OF DIFFERENT TELECOM

INDUSTRIES IN INDIA
In India, the company has a 24.6% share of the wireless services market, followed by
17.7% for Reliance Communications and 17.4% for Vodafone Essar

Bharti Airtel
24.6
Reliance
40.3 Communicationa
Vodafone Essar

Others
17.7
Slice 5
17.4
 COMPANY ANALYSIS OF BHARTI AAIRTEL BY USING
DIFFERENT RATIOS

1. Balance sheet ratio analysis

YEAR March 05 March 06 March 07 March 08 March 09

RATIOS
LIQUIDITY
RATIOS
Current Ratio 0.47 0.44 0.47 0.57 0.69
Quick Ratio 0.49 0.45 0.47 0.55 0.65
 0.8
0.7
0.6
0.5
CURRENT
0.4
RATIOS
0.3
0.2
0.1
0
Mar- Mra- Mar- Mar- Mar-
05 06 07 08 09

0.7
0.6
0.5
0.4
Quick ratios
0.3
0.2
0.1
0
Mar- Mra- Mar- Mar- Mar-
05 06 07 08 09

Interpretation :- Bharti airtel’s both current and quick ratios are moving upward means
shows increasing trends. These shows company has good liquidity position .
Company is able to pay day to obligations of company.

2. INCOME STATEMENT RATIO ANALYSIS

YEAR March 05 March 06 March 07 March 08 March 09

RATIOS
Income
statement
Ratios
Gross profit
24.29 23.14 27.47 29.08 29.33
Ratio
Net profit Ratio 14.83 17.80 22.46 23.99 22.58

0.7
0.6
0.5
0.4
Quick ratios
0.3
0.2
0.1
0
Mar- Mra- Mar- Mar- Mar-
05 06 07 08 09

30

25

20
Net profit
15
ratio
10

0
Mar- Mra- Mar- Mar- Mar-
05 06 07 08 09

Interpretation :- High income ratio shows company is at good profitability condition.

As we see that net profit ratio in 2009 decline. But this is minor decline. This is due to
high inflation rate and global meltdown. But company did not effected very much.

3. MANAGEMENT/EFFICIENCY RATIOS

YEAR March 05 March 06 March 07 March 08 March 09

RATIOS
Management
/efficiency
Ratios
Inventory Ratio 257.80 634.52 373.35 453.06 547.83
Account
11.38 12.57 14.31 12.28 12.78
receivable ratio

700
600
500
400 Inventory
300 turnover ratio
200
100
0
Mar- Mra- Mar- Mar- Mar-
05 06 07 08 09

16
14
12
10
8 Account
6 receivable artio
4
2
0
Mar- Mra- Mar- Mar- Mar-
05 06 07 08 09

Interpretation :- High inventory turnover ratio and high debtor turnover ration shows
the management’s efficiency in using inventory and collecting debts respectively. Bharti
airtel’s both ratios are high in 2009 as compare to previous years. Company is efficient in
using inventory properly and company able to collecting cash from debtors on time. In
this way it shows good prospectus for investors to invest in this company in future.

4. OVERALL PROFITABILITY NALYSIS

YEAR March 05 March 06 March 07 March 08 March 09

RATIOS
Overall
profitability
analysis
Return on asset
257.80 634.52 373.35 453.06 547.83
Ratio
Return on
0.75 0.72 0.75 1.03 1.00
investment ratio

700
600
500
400 Return on
300 assets ratio
200
100
0
Mar- Mra- Mar- Mar- Mar-
05 06 07 08 09

1.2
1
0.8
Return on
0.6 investment
0.4 ratio
0.2
0
Mar- Mra- Mar- Mar- Mar-
05 06 07 08 09

Interpretation :- High return on asset ratio shows that company’s overall profitability is
goods. Bharti airtel’s this ratios is high in 2009 as compare to previous years. So its
overall profitability is good whether its return on inventment ratio has reduced by .03
point. It may be due to inflation and global meltdown reason.
 5.MARKET TEST OR VALUATION RATIOS

YEAR March 05 March 06 March 07 March 08 March 09

RATIOS
Market test or
valuation ratio
Earning per
6.53 10.62 21.27 32.90 40.79
share ratio

45
40
35
30
25 Earning per
20 share ratio
15
10
5
0
Mar- Mar- Mar- Mar- Mar-
05 06 07 08 09

Interpretation :- High earning per share is considered good from investor’s point of
view. Bharti airtel’s this ratio is increasing year by year. It shows that investors has good
prospectus in bharti airtel if they will purchase is share.
Calculation of Intrinsic value for March FY2010
EXPECTED EPS = 26.52
EXPECTED PE RATIO= 14.28
INTRINSIC VALUE FOR MARCH 2010= 26.52*14.28=378.70

Market Price 299.70

INTRINSIC VALUE IS GREATER THAN MARKET PRICE THEREFOR

INVESTOR ARE SUGGESTED TO BUY BHARTI AIRTEL’S SHARE AT
CURRENT LEVEL ON 299.70

CONCLUSION
On the basis of this assignment’s data we can say that there will be benefit to investors to
invest their money in telecom industry because telecom industry is growing industry.
And Indian government is also providing various facilities in the development of
telecom industry. In india BHARTI AIRTEL is growing company. On the basis of its
various ratios like Current ratio, Quick ratio , Net profit margin ratio, Inventory turnover
ratios, Account receivable ratio, Return on assets ratio, Return on investment ratio ,
Earning per share we can say that company has good profitability condition, good
liquidity position, good market condition because earning per share is increasing every
year.
AND ON THE BASIS OF INTRINSIC VALUE WE CAN SAY THAT INVESTOR
CAN TAKE BENEFIT IN FUTURE BY PURCHASING BHARTI AIRTEL’S SHARE.